Asian Angle | Can Southeast Asia prioritise climate over politics to bridge the financing gap?

The region requires US$210 billion annually through 2030 for climate infrastructure investment, the Asian Development Bank estimates

Much of the investment needed stems from the cost of transitioning away from carbon-intensive industries, investing in renewable energy

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Buildings shrouded in smog in Jakarta. Southeast Asia, according to one estimate by the Asian Development Bank, requires US$210 billion annually through 2030 for climate infrastructure investment. Photo: Bloomberg

Published: 10:30am, 15 Oct 2023

In the run-up to the 28th Conference of the Parties (COP28) on climate change, Southeast Asia is in the spotlight not only as a hotspot for climate impacts but also for the urgency to take climate action. Policymakers in the region see the imperative for climate mitigation and adaptation but underscore the inadequacy of climate finance as an impediment.

The region, according to an estimate by the Asian Development Bank, requires US$210 billion annually through 2030 for climate-infrastructure investment. That amounts to 12 per cent of the US$1.8 trillion of sustainable-infrastructure investment needed annually through 2030 for emerging economies (excluding China), as estimated by an independent panel for this year’s G20 meetings.

A significant proportion of the investment needed stems from the cost of transitioning away from carbon-intensive industries, investing in renewable energy, and improving energy efficiency. Additionally, protecting forests and adopting sustainable land-use practices are vital for carbon sequestration.

Transmission lines are seen near a power plant on the outskirts of Kuala Lumpur. Photo: AP

Adaptation measures are also needed, including strengthening transport and energy infrastructure to withstand extreme weather, finding drought-resistant crop varieties, and activating early warning systems for natural disasters.

The amount of climate investment needed translates to roughly 4 or 5 per cent of the gross domestic product of all emerging economies, including those in Southeast Asia. Analysis suggests that two-thirds of that US$1.8 trillion figure, or US$1.2 trillion, will have to be raised domestically.

The remaining US$600 billion could come from international sources. About half of this amount would come from private debt and equity flows and the other half from public sources, mainly multilateral development banks. Considering that the World Bank’s total lending was US$71 billion and the Asian Development Bank’s US$20 billion in 2022, the climate financing gap would appear to be large.

There is an urgent need, therefore, to encourage multiple sources of climate finance from multiple stakeholders using innovative financing mechanisms. Political constraints preventing the opening of new avenues away from the monopolistic or oligopolistic hold of state-owned enterprises need to be addressed.

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Asian Angle | Can Southeast Asia prioritise climate over politics to bridge the financing gap?